After four decades of offshoring, a combination of pandemic-era supply shocks, rising geopolitical competition, and renewed policy focus is driving a concerted effort to rebuild America's industrial base.

In this article, Apollo's Head of Thematic Investing Rob Bittencourt explores:

• Why US manufacturing has shrunk from ~28% of GDP in the 1950s to just 9% today
• How a series of supply shocks and geopolitical tensions made reindustrialization a rare bipartisan priority
• What early investment trends reveal about the pace and scope of the buildout so far
• How much capital will be required to restore America's industrial base, and where it will come from

For much of the past four decades, a combination of globalization, technological change, shifting trade policy, and a relatively stable geopolitical backdrop reshaped the geography of global manufacturing, increasingly moving production away from the US and toward lower-cost markets.

As that shift took hold, US investment steadily migrated from factories and industrial equipment toward software, services, research, and other asset-light sectors. China moved in the opposite direction, investing heavily in manufacturing capabilities, infrastructure, and physical supply chains until it became the world’s largest manufacturer. That left US companies increasingly concentrated in the higher-margin parts of the value chain, with competitive advantage shifting toward intellectual property, brand, distribution, and customer relationships.

That model delivered efficiency, but it also introduced fragility in the US economic system. US manufacturing has fallen from approximately 28% of GDP in the 1950s to roughly 9% today, leaving the country with stagnant capacity and greater dependence on foreign suppliers for critical inputs such as pharmaceuticals, semiconductors, and defense components.

The consequences are visible across the US industrial base. Compared with the 1980s and 1990s, the number of major defense contractors has fallen from 51 to five, the number of large shipyards from 19 to eight, and the US share of global semiconductor manufacturing from 37% to approximately 10%.⁽¹⁾ Even many products assembled domestically still rely heavily on imported components and raw materials.

Exhibit 1: The Declining Economic Significance of US Manufacturing

Those vulnerabilities remained largely theoretical until a series of shocks exposed them. The pandemic demonstrated how quickly shortages of semiconductors, medical supplies, and basic industrial components could disrupt the economy. Rising geopolitical competition turned production capacity into a national-security issue, while wars in Europe and the Middle East are further straining defense supply chains already under pressure to replenish stocks. At the same time, AI has created a new source of demand for electricity, data centers, advanced semiconductors, cooling systems, and industrial equipment.

Those shocks changed the policy calculus. Reindustrialization is one of the few priorities that commands support on both sides of the aisle. Under the previous administration, the Bipartisan Infrastructure Law authorized $1.2 trillion for domestic infrastructure, the Inflation Reduction Act directed hundreds of billions of dollars toward energy and industrial policy, and the CHIPS and Science Act provided $52 billion to support domestic semiconductor production.⁽²⁾ The current administration has framed domestic production as central to both economic and national security, with a stated goal of reshoring critical supply chains and rebuilding strategic industries. Tariffs, export controls, tax incentives, loan programs, government guarantees, and direct investments are now being deployed alongside traditional fiscal tools. Tactics may differ by administration, but the objectives are broadly aligned—secure critical strategic supply chains, increase domestic production, and reduce dependence on geopolitical competitors. 

The ambition to reindustrialize is clear, but the challenge is executing it at a viable cost and scale. Labor is more expensive in the US, permitting can take years, and skilled manufacturing workers are scarce. Supply chains that took decades to offshore cannot be recreated by executive order. Technology could help ease some of these constraints. Additive manufacturing, robotics, and AI-enabled design can reduce tooling and labor costs, compress development cycles, and improve productivity, while autonomous systems—from warehouse robots to self-driving industrial vehicles—can offset labor shortages and speed the movement of goods through the supply chain.

Early signs of a broader rebuilding are starting to emerge. US construction spending on manufacturing and oil and gas projects tripled in the three years following the pandemic to approximately $250 billion. The buildout remains narrow, however, with much of the increase concentrated in computer and electronics manufacturing, particularly semiconductor facilities and infrastructure connected to the compute buildout. Investment across the broader manufacturing base has been more modest.

Exhibit 2: Manufacturing Investment Is Surging, but Has Been Narrow So Far

Government incentives generally cover only a fraction of project costs; companies, lenders, infrastructure investors, and private capital providers must finance the remainder. The capital need will extend far beyond the factory walls, encompassing the supplier networks, workforce, and surrounding industrial capacity required to make domestic production viable.

Exhibit 3: Multi-Trillion-Dollar Investment Required to Restore the US Industrial Base